Concept explainers
Concept Introduction:
Inventory Turnover:
The financial ratio that measures the frequency of the company in selling its products refers to inventory turnover ratio. In other words, inventory turnover can be stated as the capability of the company in converting its inventory into cash.
Requirement 1:
To Calculate:
The inventory turnover ratio of SCC Co. for the current year to measure its efficiency in managing the inventory.
Concept Introduction:
Requirement 2:
Day's sales in inventory:
The measuring ratio used to determine the average time period used by the company in converting its inventories to sales refers to days sales in inventory. Low Days sales in inventory is favourable as it indicates that company is efficient both in sales performance and inventory management. High Days sales in inventory, on the other hand indicates weaker sales performance and inventory management.
To Calculate:
The day's sale in inventory for theSCC Co. for thecurrent yearto determine its efficiency in converting inventory to sales.

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